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Nicaragua - Why CAFTA Makes Things Worse

Nicaragua - Why CAFTA Makes Things Worse

By Toni Solo

"...sometimes we buy an egg, but not very often because we are very poor..." he had walked with his two small children for over two hours in order to see the visiting paediatrician. The children wee underweight, their clothes threadbare.

The doctor had asked what his family normally ate. Sometimes beans sometimes rice, eggs not very often. Earlier one woman had come in with her little girl. She could hardly speak she was so tired and hungry.

These people had walked for hours in the fierce sun for the chance to get some medicine for their children. One had no need of a medical degree for the diagnosis - sheer hunger. Neo-liberal politicians can take satisfaction in those starving people. The "free market" is doing its work.

There in Macuelizo, about a half hour's drive from the departmental capital Ocotal, people were better off than places further west, Santa Maria, Somotillo, where tortillas and salt are often enough all there is to eat. Even in urban barrios in large cities like Ocotal and Esteli, plenty of families often fail to light a fire to prepare a meal every day. Why waste precious firewood with no food to cook?

That reality is common throughout Central America and indicates why fancy sounding treaties like the Central American Free Trade Agreement have nothing to offer the poor majority. They are treaties in the interests of already wealthy local elites and foreign corporate investors. The official logic advanced to justify CAFTA was that by opening up its economies even more than it had done already, the region would attract investment, increase productive capacity and generate employment.

But Mexico's experience of "free trade" with the US, indicates clearly what is likely to happen. Foreign investment will indeed increase but the general population will not benefit. Increased liquidity in local financial markets will sloosh out of the country in capital flight. Investors will stick with high-profit, low-risk sectors, their activity characterised above all by short-term volatility. Sectors that have been starved of investment before will most likely stay that way.

Subsidised US agricultural products like rice and maize will flood local markets. Small agricultural producers in the region will be reduced to subsistence farming since only medium and large agricultural businesses will be able to get credit. That has already been happening for years in Nicaragua. Depopulation is chronic in rural areas as able-bodied people migrate in search of liveable incomes, to nearby urban centres, to Costa Rica and other neighbouring countries, to North America.

But if rural areas depopulate, who will tend the environment? Already much of north western Nicaragua, south western Honduras and south eastern El Salvador is virtual desert. Each year farming communities find it harder and harder to survive. Cash-crops like sesame are precarious. Growing basic grains is a lottery. As the hurricane seasons become more destructive year by year, environmental degradation and rural depopulation become more acute. By now the process in the worst affected areas is irrversible.

In Mexico after over ten years of the North American Free Trade Agreement the varied costs of the slump in agriculture have tended to outweigh any strengthening in light industrial activity like the maquilas, or service sectors like tourism. Likewise in Central America, increased government borrowing to finance structural measures necessary to implement CAFTA will be compounded by a drop in revenue from vanishing import taxes. Local taxpayers will once again pick up the tab to finance "free markets" - not just in increased indirect taxes to finance widening public sector budget deficits but also in even more reduced public services than they get already.

The idea that increased investment activity will generate sufficient new tax revenues to offset increased public sector costs generated by CAFTA is crazy. Local business elites and US corporate investors will just kick their profits out of reach of national governments to wherever suits them best. Ordinary people will feel the pinch as businesses increase prices in order to offset their own increased costs. The nonsensical logic of CAFTA yanks public policy away from any coherent planning and accountability so as to prioritize unaccountable corporate greed.

Healthcare, education and other public needs, like transport or environmental policy, have already been delegitimized and neglected in Nicaragua for over fifteen years.The energy and environmental crises will become steadily more acute over the next four or five years. As they do so, the irrelevance and foolishness of prioritizing ruthless local elites and foreign corporate investors through measures like CAFTA will become obvious. In a very short while, the importance of meeting fundamental public policy objectives is bound to reassert itself sharply.

Issues like food security, adequate healthcare, efficient public education and socially and environmentally appropriate transport and energy policy will not be resolved by "free markets". They require forceful government intervention as well as broad public participation and support. A neo-colonial managerial class based in international financial institutions like the International Monetary Fund, the World Bank and the Inter-American Development Bank has tended to usurp government functions and promote corporate friendly measures like CAFTA and Plan Puebla Panama. They have done so with appalling complacency.

Deepening the discredited "free market" policies imposed on weak Central American governments over the last twenty years will only exacerbate existing deep-seated failures. CAFTA is irrelevant to people's basic needs. The vast majority of parents have to make ever greater sacrifices from one year to the next in order to give their children the best they can. One has to wonder at the contempt for human life of the people responsible for such misery. Central America's history demonstrates such contempt is not sustainable without damaging and destructive political consequences.


toni solo is an activist based in Central America - contact via

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